Analysis: Cash plans and PMI excesses

As cash plan providers continue to develop solutions to help employers and employees cover PMI excesses, Sam Barrett looks at some of the implications

As cash plan providers continue to develop solutions to help employers and employees cover PMI excesses, Sam Barrett looks at some of the implications

Using a cash plan to mop up a medical insurance excess is a common sales strategy in the corporate arena. But, while it has been operated on an unofficial basis for the last few years, it has now been formalised with the launch of medical insurance excess cover by Simplyhealth and Medicash.

The two providers have taken slightly different approaches to offering the cover. On Simplyhealth’s corporate cash plan it is available as an optional module. Three levels are available, starting at 25p per employee per week, which gives £100 of excess cover, and rising to 75p per employee per week for £300 of excess cover. Conversely, Medicash includes it automatically on its Proactive corporate plan, wrapping it up with its specialist consultation and diagnostic tests benefit. It has four benefit levels, starting at £1 a week for £200 of cover a year and rising to £5 a week for £400 of cover.

For Howard Hughes, head of employer marketing at Simplyhealth, formalising excess cover was a logical step.

"It makes sense," he says. "Advisers are shrewd and are selling cash plans to fit alongside medical insurance and soak up the excess. If it’s going to be sold this way, we have to make sure it works properly."

Making sure it works properly is welcomed. Without a separate excess benefit, an employee would have to pay the excess and then send the excess statement letter they receive from the insurer on to the cash plan provider, claiming for it under the specialist consultation benefit.

Paul Gambon, head of sales at Medicash, says this was not always the smoothest of procedures.

"Having excess cover benefit does make it easier," he explains. "Not all medical insurance claims start with a specialist consultation and you could also run into problems where treatment ran across two policy years and two excess periods."

Additionally, given the complexity of the process, it required thorough communications to ensure that employees understood how to claim their excess payment so they did not feel out of pocket if an excess was introduced to cut costs.

Excess distress

But not everyone is happy to see cover for excesses being given such a prominent spot.

"They’ve taken a good idea and ruined it by making it too easy to claim on both products," says Mike Izzard, managing director of Premier Choice Group. "We’ve been recommending cash plans alongside medical insurance excesses for the last five years and it worked. This is a salesman’s dream but there could be serious repercussions."

Recommending these excess plans is certainly something of a no-brainer for any healthcare adviser. By adding an excess to a medical insurance policy, they can generate sufficient discount to pay for a cash plan that, in addition to all the traditional benefits, also covers the excess that was introduced to pay for it. This could drive huge growth for the cash plan market.

But, for Nick Lipczynski, director of IHC, the specialist healthcare consultancy, the benefits simply do not stack up. He is concerned that the cash plan providers are offering so much more for, in some cases, no additional charge.

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